Question

Check my work 6 Square Hammer Corp. shows the following information on its 2018 income statement: Sales-$242,000; Costs = $153,000; Other expenses = $7,900; Depreciation expense = $17,700; Interest expense-$14,100; Taxes = $17,255; Dividends-$11,000. In addition, you're told that the firm issued $5,600 in new equity during 2018 and redeemed $4,100 in outstanding long-term debt. points a. What is the 2018 operating cash flow? (Do not round intermediate calculations.) b. What is the 2018 cash flow to creditors? (Do not round intermediate calculations.) c. What is the 2018 cash flow to stockholders? (Do not round intermediate eBook calculations.) d. If net fixed assets increased by $22,000 during the year, what was the addition to NWC? (Do not round intermediate calculations.) Print References Operating cash flow b. Cash flow to creditors c. Cash flow to stockholders d. Addition to NWC

Answer 1

a. Earnings before interest depreciation and taxes ( EBIDT ) = Sales - Costs - Other expenses = $242,000 - $153,000 - $7,900 = $81,100

Operating cash flow = EBIDT - Taxes = $81,100 - $17,255 = $63,845

b. Cash flow to creditors = Interest expenses paid - Net new borrowings = $14,100 - ( - $4,100 ) = $18,200

c. Cash flow to stockholders = Dividend paid - Net new equity raised = $11,000 - $5,600 = $5,400

d. Cash flow from assets = Cash flow to creditors + Cash flow to stockholders = $18,200 + $5,400 = $23,600

Net capital spending = Depreciation + Increase in fixed assets = $17,700 + $22,000 = $39,700

Cash flow from assets = Operating cash flow - Change in Net Working Capital ( NWC ) - Net capital spending

$23,600 = $63,845 - Change in NWC - $39,700

Change in NWC = $545

Thus , Addition to NWC is $545